22/11/2013
Prime Minister’s Youth Business Loans Scheme
Small Businesses have potential to revitalize economic activity by creating employment opportunities, reducing poverty and providing economic linkages/services to the corporate sector. The growth of Small Businesses and their access to formal finance is imperative for development of economy. However, despite their strong potential, the small businesses particularly young entrepreneurs have traditionally remained credit constrained due to risk perception of banks towards these economic segments. On the other hand, the educated youth generally lacks entrepreneurial skills.
The Government of Pakistan is cognizant of this scenario and is committed towards uplifting the youth and providing them opportunities of financial independence through self employment. With this objective, the Government has introduced Prime Minister’s Youth Business Loans scheme with a mark-up subsidy and partial guarantee facility for extension of small business loans upto Rs. 2,000,000. Salient features of the scheme as approved by the Prime Minister are reproduced below:
1 Brief Description
Small Business Loans will focus on (but will not be restricted to) unemployed youth, especially educated youth looking for establishing or extending business enterprises
2 Eligibility Criteria
All men/women holding CNIC, aged between 21 and 45 years with entrepreneurial potential to apply from designated branches mapped with area of residence/business.
3 Security Requirements
One guarantor
4 Permissible Collaterals
Business hypothecation
5 Focus on Women
50% of loans will go to women borrowers
6 Debt-Equity Ratio
90:10
The borrower’s contribution of equity would be in the form of cash or immovable property and will be required after approval of the loan.
7 Loan Period
Tenor of loan upto 7 years with six (6) months grace period.
8 Pricing
8% fixed for borrower. Government will pay the difference of the cost at KIBOR+500bps
9 Risk Mitigation
Government will bear upto 5% losses on the portfolio of the bank under this scheme
10 Number of Loans
100,000
11 Size of Loan
Upto Rs 2,000,000 (Twenty Lacs)
12 Allocation in Budget 2013-14
Rs. 5 billion
13 Executing Agency
In the first instance, National Bank of Pakistan (NBP) and First Women Bank Limited (FWBL) under the guidance and supervision of State Bank of Pakistan. SBP to ensure participation of private banks:
a) Private banks will be required to participate in this scheme on the basis of soundness of business proposals; and
b) SBP will encourage private banks to build this portfolio commensurate with their size.
c) SBP will arrange appropriate training for private banks to implement this scheme.
d) NBP will continue to play the lead role.
14 Sectors and Products
All sectors. Standardized schemes/ projects/ undertakings will be designed by SMEDA, projects designed by private sector service providers or by individuals themselves will also be admissible.
Role of SMEDA:
a) The 50 feasibilities prepared and uploaded by SMEDA will be extensively publicized and their access to public made easier through multiple linkages with other relevant websites.
b) SMEDA will work closely with Punjab Information Technology Board (PITB) to ensure that the schemes are accessible to those who participated in the PITB survey.
15 Application Form
The Form would be both in English and Urdu; and require minimum essential information with simple format.
The processing time will not exceed 15 days and will be so stated clearly in the application form; and
The forms would be readily available both in branches and through dedicated websites of the banks.
Non-refundable form processing fee will be Rs. 100 (One Hundred).
16 Monitoring
SBP will publish consolidated information about the loans extended under this scheme for information of the public on quarterly basis on its website;
An effective Complaint Center to process and resolve complaints will be set up;
E-government directorate of Ministry of IT will provide support
17 Geographical distribution
Whole of Pakistan. In case of Balochistan, at least one branch of NBP will be designated per Division.
All non-designated NBP branches will also provide and receive filled application forms and dispatch them to the nearest branches.
State Bank will monitor implementation of the scheme through Weekly, Monthly and Quarterly reports. The banks are advised to gear up their systems for successful operations of this scheme and to avoid any misuse of the scheme.
Application Forms for the loans under this Scheme will be available on NBP and FWBL’s websites and eligible borrowers can apply for the loans immediately after formal launch of the Scheme by the Prime Minister.
